Treasury Committee

Wednesday 15th July 2026

(began 2 weeks ago)

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None Portrait Speaker 2
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So the scheme is now partially suspended. We agreed that with the parties and by order of the court. But that does mean a significant amount of work does need to proceed. And so in the coming months, firms will need to deal with cases which where the issues are not in dispute in the court case, where consumers are not eligible for redress. Because one of the things that's happened with the pause is consumers who are normally entitled to an answer within eight weeks are not getting any answer at all.

And that includes an answer no. And it's important that those who are not entitled to redress know about that as well, because some of them may be have had their expectations raised or expecting a payment and it might not be forthcoming. Um, we also, um, are moving forward with the processing of claims that are not within the scheme. So high value loans, a very small portion overall, 0.5% of the agreements here. They can move forward now as well. And as I said, there are 111 lenders.

There's a range of of readiness. We are seeing commitment generally across the market, but not everybody has gone as far as we would like them to in terms of, um, getting their operational processes up and running, making sure they're sorting out the agreements that fall into the different categories, making sure that they've got the right customer service support mechanisms in place. If there are queries that come back from their customers when they contact them. But we will be supervising that very intensively. And I think, generally speaking, um, you know, in light of the feedback we've given, we are seeing commitments.

What I've also would stressed, um, in terms of readiness and we've been really clear about this in our public communications and I'm happy to explain our thinking to the committee is we're confident in our scheme, we're defending it. We'd like it to go ahead. Parts of it are moving forward, as I've just explained. We also need everybody to plan for the scenario in which the scheme is quashed, because that is what the parties on both sides, both sides are asking for, and that means no scheme planning as a central planning scenario.

Um. Of course should the should the tribunal rule in that way. We'd have to consider at the time all of the relevant factors and make a decision. But one thing we'll have to think about at that point is, is it desirable to produce a new scheme where you have to do another year of consultation?The new scheme could be subject to legal challenge again, which could take another year. And remember, people are entitled normally to an answer within eight weeks.
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None Portrait Speaker 2
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In any dispute situation, the two parties can agree a settlement. Um, irrespective of whatever, whether there's a scheme in place, including in, in, in a court situation, that's an established part of our legal framework. So while we have paused the complaints, lenders can reply if they want to and offer make an offer to, um, the complainants. Clearly with the millions of complaints, as many as 6 million by February, probably much higher by now. Um, we paused so we can bring some order to this consistency, fairness and a structured mechanism, including an independent review mechanism by the Financial Ombudsman Service, so that this could be dealt with decisively and to give certainty not only to consumers but to investors as well.

Um, I think we would take a very dim view if lenders, um, sought to make, uh, settlement offers below the level of the scheme. We're not, we're not hearing anybody is contemplating that. Um, so, um, what we, what we would envisage happening is lenders who wish to move forward and it's entirely optional for lenders who wish to move forward, who wish to make offers to consumers in line with the scheme. Um, we would obviously be verifying that through supervision as necessary. Um can do so in full and final settlement.

And those consumers who have been waiting many years for the money, who are happy with that level of settlement, who are aware that there's legal challenges going on, but notwithstanding those would like to settle and get the money and get on with their lives can do so.
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None Portrait Speaker 2
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We're working very closely with the Financial Ombudsman Service, and I'm glad that you engaged with them to understand their preparedness here. The, um. The numbers of complaints that might arise, whether if the scheme goes ahead versus it does not go ahead, is hard to predict. We've put some estimates out in our cost benefit analysis. Um, in the, what we will learn in the next few months because the scheme is only partially suspended, is we will learn a lot about the operational preparedness of lenders, and we'll learn a lot about how they are dealing with certain types of claims.

So what do I mean by that. The um. Uh. The claims that are not eligible for redress and that are not at issue in the litigation will move forward. And so consumers who are not entitled to address will get an answer. We'll see how many of those seek to challenge that answer in the Financial Ombudsman Service. Um and that will give us a good sense in the next few months of what the numbers might be, um, in future scenarios.

Likewise, the lenders, it's a small number, but the lenders who have to deal with complaints like high value loans, which were where some may merit compensation. Um, we'll see how lenders behave if they seek to simply dismiss all those complaints and say they're not going to pay anything. Um, I would envisage they'll get a lot of those going through the Financial Ombudsman Service and the complaints will rise. So I think we've all got our estimates. We'll learn a lot in the next few months, and we will make sure for all scenarios, everybody is ready, the Financial Ombudsman Service, but also the lenders.

And we are holding the lenders feet to the fire to make sure they have provisions that they have capital in the United Kingdom to make sure they are ready to deal with all scenarios. They have had many years now to prepare. Um, and we need to respect the litigation and the process and then move forward with whatever answer it gives us.
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None Portrait Speaker 1
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Thank you.
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None Portrait Speaker 7
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I mean, I think I, um, since the beginning of the year, I've been chairing the PSR, which as you know, is going to be folded ultimately into the FCA. Um, and I think what's interesting there is, is in the context of app fraud, where there's a remediation standard or rule, um, app. Fraud, uh, has reduced in scope. App fraud. The issue, um, more broadly is the overall measure of fraud across the system is increasing, which is one of the reasons why in our, um, strategy that we published last March, we said that our aim was to reduce the growth of fraud.

And that was a realistic aim as opposed to an unrealistic aim. The in the context of payments, um we are. Pretty much really in the design phase at the moment, because there are so many interlocking features, it's important that the infrastructure itself, the new infrastructure is sufficiently interoperable with fundamentally new forms of money, including stablecoins. The, the issue of fraud risk is incredibly important. We look at stronger customer authentication standards and similar. But I think from my perspective, from a strategic perspective is what which is what the FCA board does and the PSR board does.

It's over the next few months, we're going to have to be laser focused on the balance between, uh, interoperability, uh, the resilience, which of course, we work with the Bank of England on and the ability of the system to withstand. Fraudulent activity, including as part of that cyber attacks, without any doubt. And that gets us on to frontier models and such like.
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None Portrait Speaker 5
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Thank you.
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None Portrait Speaker 2
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So we set out to the Prime Minister last year, the 50 or so measures on growth, many of which included the Leeds reforms. We've largely delivered all of those to the extent that we are thinking about our priorities going forward. Much of what's left of the Leeds reforms is now contingent on legislation. That legislation is now before Parliament, so the reforms, the senior managers regime, the reforms to the redress system. So as and when those get concluded, um we can then move forward and execute against the final stages of those.

Um we've also moved beyond the Leeds reforms and we're, we're working in a very dynamic, fast moving market. At one point, I wanted to underline today to the committee is just the extraordinary pace with which we are seeing market developments. There is the scale, pace, force of technology affecting financial services in the economy, which I don't think has ever been seen before in history. Um, and that is contributing to all the work we're doing in our AI labs. Um, we saw the first authorization of a tokenized fund, um, come through fully end to end on chain, which had come through one of our sandboxes last year.

Um, we are looking at, um, a genetic capability, a genetic AI capability in our organisation to be able to monitor markets more effectively. We're, we've launched the fixed income, consolidated tape, the equity consolidated tape. Um, and we'll be making announcements about that shortly. So the pace with which we're moving on reforms is really important. And um, there is a debate we need to have and a discussion we need to have about how legislation and rules can cope with the force and pace with which the market is moving.
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None Portrait Speaker 2
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Let me take an example that Mr. Grady touched on earlier payments. You know, we are dealing with huge opportunity from innovation, which can be transformative for the economy and for businesses. And we and is moving at incredible pace as we enable those innovations to come at force and at scale into our market. We are we are managing a risk of financial crime on the other side. Um, and we are not going to be able to allow all those innovations in and guarantee you that there won't be risks on the other side.

So for example, in the e-money world, we've, we've tightened up the safeguarding regime. It was an area where we allowed a lot of companies in. But 65% of the of the money of those e-money companies that failed ended up being lost for consumers. We've now got new risks around cyber risk and resilience risk. So, um, what I would, what I, where I think we need to go with this is, and this is emerging thinking is, you know, some sense of thresholds, um, around what level of tolerable.

Um, and it's hard, I think to have a discussion about what is the level of tolerable market integrity risk, crime risk and AML risk. What is the level in the context of frontier AI?We need to have a discussion about the tension between availability and security. Sometimes things need to be taken offline for a bit longer to make them secure, which will impact availability. And we need to have a discussion around thresholds in the context of lending. I've talked about mortgages and consumer credit.

Today is a really important day. Buy now, pay later after sort of 5 or 6 years is regulated from this morning. Um, we can ensure access to credit and we've loosened the mortgage standards. We've seen many more first time buyers over the last year come in benefiting your constituents, but in a tough interest rate cycle, some more people may fall into arrears. And we're seeing a slight tick up there and having some sense from you of the thresholds that are tolerable.

Help us manage the system and engage with you on how you've.
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None Portrait Speaker 4
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Thank you.
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None Portrait Speaker 3
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Process.
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None Portrait Speaker 4
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But how do.
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None Portrait Speaker 4
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We do that.
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None Portrait Speaker 2
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Um, I would say that, um, you know, I've mentioned it previously, sometimes we have statutory deadlines in the competition arena. There are statutory deadlines for the government. When the CMA makes recommendations. The government under the Enterprise Act, a certain amount of days by which you have to respond. This market is moving within weeks. At times. If we make a recommendation, which we will have to do thoughtfully, having a commitment to a response to that within 30 days, a statutory deadline for the Treasury or whatever to respond transparently.

Are they going to act or are they not going to act?Goes to the question about risk. If you're not going to act, then at least then we know who owns the risk and it's clear and it's in your then you, as this committee and Parliament can hold all the actors in this system accountable for it. So statutory deadlines, I think. Um, and then I think the, um, I think we also have to be realistic and this is where I get into difficult constitutional territory because I recognise it's not really my, my place to sort of talk about the balance between the institutions.

But, but there may need to be more delegated authority in certain areas because the markets are moving so fast and you simply can't wait 18 months or two years for legislation. Also in a world. The other thing, you know, I was, um, I was with my family in Lincoln Castle on Saturday, which is one of the four places alongside Salisbury Cathedral that has the Magna Carta original Magna Carta. A refresher on the rule of law. Um, but, you know, we have large companies, whether they are big tech companies, large financial services companies who should they wish to and whether it's us or my fellow regulators can slow us down for years through the judicial review process.

Now we all respect the rule of law. Ultimately, Parliament's responsible for it. We follow the rule of law. Your constituents sometimes need answers in weeks and months. So how how do we sort that out.
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None Portrait Speaker 4
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Mr. Alder?
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None Portrait Speaker 2
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Very, very.
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None Portrait Speaker 2
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So, uh, financial crime, market integrity risk, I've touched on that. Um, I think that is, um. Increasingly preoccupying us. If I look at the enforcement cases we have on our books right now, 75% of them are now linked to work tackling financial crime. That was about 30% a few years ago. The sophistication, complexity, um. Impressiveness of some of these serious organised criminal actors. I say that in a in a, in just how professional they are across border and the way they inflict damage on consumers around the world is important.

And you're seeing us lead the work on influencers globally with other regulators as well. So that's one big, big area. Um, I would say secondly, um, opportunity and harm. So we published the Mills review, our former now former colleague, um, distinguished colleague Sheldon Mills, View my form now. A distinguished colleague, Sheldon Mills, who worked very closely with Sarah in particular, looked at. We wanted to ask the questions about the future on AI. You know, we're doing so much work on today.

What's the questions about the future and the you know, we we are seeing a world where we think consumers are going to be increasingly willing to use large language models, agents to do core financial services, um, activity for them. And I don't think we can pretend that we're going to stop that. Um, so what we need to do is figure out how we're going to enable that innovation in a way that generates huge benefits to consumers, but also make sure that all the traditional protections around crime, liability, fairness of treatment, good communication, good understanding are also dealt with.

That's a major issue for us as well.
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None Portrait Speaker 6
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So we've made a decision at the FCA that we ourselves know that we want to use AI. We are already using AI in some of our supervisory frontline decisions and some of our authorisation cases. So, um, we are deliberately setting that culture ourselves a little bit sometimes of experimentation around how AI can help us be more operationally effective and how we can, um, learn the, the skills as we go. Um, this will be fundamentally something that needs to be cross-cutting for every one of us.

Like I will need to understand the implications fully. We've invested in our senior leadership team as a whole so that people can have, um, in-depth training about how we can lead through AI. And this won't be something that one team by itself should do. This will be something that will be absolutely cross-cutting. The other aspect, as well as the forward looking, is we have really set a culture of experimentation. We want to see financial services experiment. We've scaled our sandboxes.

And I think what will be very important for the system, and we are having a look at, because this is featuring in a lot of our discussions with firms, is how we can give more of that feedback loop around what we're seeing where, um, the good practices, where the real issues are around explainability, maybe issues around outcomes, bias. Um, we've done some thought leadership work in terms of bias and AI models, but we want to be working alongside those that are experimenting now. And we know that we need, and we want to be giving the feedback loops in terms of what we're seeing currently to.
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None Portrait Speaker 3
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Thank you.
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None Portrait Speaker 4
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Long while.
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None Portrait Speaker 2
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Yeah. So I think we're broadly comfortable with the way the mortgage market is working. It's healthy, it's competitive. The on arrears, um, the latest quarterly number of repossessions, I believe is about 1200, which is modestly higher than previous quarters, but a long way lower than we saw in previous episodes of sharp increases in interest rates and actually arrears levels overall have started ticking down in the last few months. Um, so we would, we would attribute a lot of that to the consumer duty borrowers in financial difficulty work that we did.

Um, and general improvement in the way lenders are going about how they treat their customers. Miss Pritchard talked about the customer satisfaction index. Lenders, we tend to see work really hard to keep their customers in their home and go for repossession as a, as a last resort. And sometimes repossession is the better outcome for a consumer. Our attention is also focusing now on the future. Um, so we've done a lot on first time buyers. We've got some more to do.

Um, on those who have variable incomes, those who may have temporary work or who are self-employed. And we've got some proposals which have just closed for console, which are closed for consultation at 28th on 28th of July to enable it easier for those people to access the market. We really want to tackle later life lending. There's £4 trillion of housing wealth in the United Kingdom. When people retire, 80% of their wealth is in their housing or in their DC pension. The DC pension is very often not going to be sufficient in terms of generation of income, even with alongside the state pension for the living standards that people expect.

If we if we're not able, in a sensible way to unlock some of that housing wealth so that people can make use of it in retirement, people won't have the living standards they want. Um, and I think we need to rethink that. So we're working on that as well. Um, and we're also trying to make it a little bit easier for people who go through some challenging life events where they need temporary lending to be able to access the regulated market.
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None Portrait Speaker 2
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An evidence.
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None Portrait Speaker 6
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Eight are now authorized, and we've been speaking to, um, 30 in total, which, given the regime went live at the start of April, is encouraging signs of progress. I'm not sitting here saying that that by itself will solve what you've described for there about the advice gap. 9% of individuals receiving regulatory financial advice. This is where we need to look at it in a system as a whole, targeted support is important. Simplified advice which we have consulted on which we want to see much greater uptake is important, as is full financial advice.

AI is a really important um. Sheldon's described some of the features of AI as like a financial coach in your pocket. So the question is, and this goes to the heart of the perimeter question. Um, we raised it in our perimeter report that, um, AI models as they're currently constructed are outside our regulatory perimeter. We've um, issued some guidance out there on investment to consumers to make because we're worried want consumers to make sure that they know what's protected, what isn't.

We've got to look at this in the round. We've got to make sure that the benefits of AI in terms of that financial guidance can be seen by consumers, but equally that consumers are protected in terms of fraud and scams. One of the things I did want to highlight, just to take the opportunity of being in front of you today, is our firm checker, which is, uh, the, um, improvements that we've made to our system so that individuals can check very quickly whether a firm is authorised.

We've seen real uptake on this since we've been running some significant media campaigns on this this year. And the one message always to consumers is please go and check firm checker before you're engaging with the financial services firm to find out whether they're authorised by us or not.
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None Portrait Speaker 6
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Premium finance, um, consumers paying monthly for their insurance, it wasn't a once and done piece of work. And our focus with those firms continues. What we were able to do is use the consumer duty, um, act at pace through our fair value rules, um, taking action, which has benefited consumers by 157 million a year. We see big reductions in April's for those firms that we have directly challenged, um, at 7% on average and a 4% on average for those across the market as a whole, we continue that follow up work.

We are engaging with the next tranche of firms that we didn't, um, that we didn't engage with directly at the first stage of that review. And so our focus very much remains on how firms are implementing our fair value rules in practice. If I just take a step back and think about the insurance sector as a whole and why it's so important in terms of our strategy, um, helping consumers deal with unexpected shocks. Um, that is one of the key features of our strategy that we want consumers to, um, be able to access insurance products.

And there is the conversation that we've had at the previous committee around can we mandate, um, particular products if they're not commercial?And I was very clear in that session that that is beyond our remit, but we've taken really significant action on gap Insurance 2024. So not long after the consumer duty came in, taking action under fair value, which led to £70 million back in terms of gap insurance, our focus remains the insurance market serves, importantly for consumers and premium finance is is, I would say, a good example of us being able to use our consumer duty rules, um, to deliver quickly to see reductions in rates on a swift basis.
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None Portrait Speaker 2
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I think also look at the outcome metrics. Sarah spoke about the customer satisfaction index, the highest ever for banks and building societies, the highest scoring sector. That's come from the consumer duty. We are seeing in our own financial life survey trust metrics in financial services, improving banks. An extent, insurers insurers have got a bit more work to do in asset managers to the fscs levy at. It's at a ten year low to the extent that the fscs levy is a signal of consumer harm, which needs to be compensated.

Um, so I recognise the critique. Um, and I think that there are many organisations that would like to see us using enforcement tools much more forcefully and much more publicly. I don't want to beat the. Debate around enforcement transparency, as Miss Pritchard has told you. Um, without naming any names that we have a number of those cases up and running. So I think we, I think we are delivering on our consumer protection objective, but we're also doing it very transparently with you in a way that's rebalancing risk and that is seeking to reform our regulatory system and is seeking to deliver the mandate we've been given by Parliament on growth and competitiveness as well.

And yes, the risk, appetite and risk thresholds will make a difference. I think the Financial inclusion report you have given will make a difference. We have surfaced in our work, for example, that 58% of adults do not hold pure product protection products, life critical illness or income protection. Um, we can't solve that on our own. That is something that goes much beyond purely the FCA. And we can help though surface it.
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None Portrait Speaker 5
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Okay.
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None Portrait Speaker 4
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I thought that.
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None Portrait Speaker 2
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Well.
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None Portrait Speaker 3
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No, not that either.
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None Portrait Speaker 1
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So clear about that.
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None Portrait Speaker 2
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Yeah. So thank you. So look, I've had a bit of contact with them and I've asked them about this. Um, but let me sort of step back if I may, and think about it and say how I think about it and look. So this is under the general heading, it seems to me, of cyber security and cyber security, of which, you know, the perimeter access to the budget documents is kind of one small part. Cyber security is surely a challenge for absolutely every organisation.

I mean, it must be a challenge. You know, if I may say, you know, for Parliament and for this committee and so forth. So that's how I sort of think about it. So the way I think about it is there are sort of two levels to this. One level is a sort of I don't know whether these are the right words, a kind of a basic hygiene level to make absolutely sure, um, given the expertise of the National Cyber Security Centre and so forth, that every organisation is adhering to, as I say, that kind of basic hygiene.

I've had a few conversations with the OBR on this, only a few. And my understanding is, and from reading some of the public information following that, that Early access episode, my understanding is they've done lots of work in that area. They've had a lot of good people advising them and so forth. So that's my sort of first thought. Could I expand on that just for a minute?The risk of giving you a slightly long answer. Um, the way I think about the OBR is it's, it's essentially it's an, it's an information rich producer.

I mean, that's what it's doing. It's not producing, you know, ingots of steel and, you know, ships and aeroplanes and cars and so forth. It is producing information. And so digital security is a first order, you know, item on the risk ratio. Um, so getting to the basic hygiene is kind of step one, it seems to me, and as I say, my sense is there's been lots of work. The question is whether the organisation wants to move a step up and what I have in mind, and if I can bring in a little bit of my Imperial College experience.

If you look at the way and I'm sure you've heard evidence of this, um, the way the science community and other communities have integrated, you know, Claude Codex open AI. GPT, I've integrated them into their workflows. Um, that, that is a fantastic, you know, a way of, I think improving productivity, especially as I say in my college, but it means to use those frontier. You know, frontier computer programs and so forth. It needs a frontier level of cyber security. So were the OBR to go in that direction, which would I think be, you know, something really to worth looking at.

I think that would take a second step. And I'm less sure that the OBR has made that second step. So I think, um, in answer to your question, I think checking on the first, which I'm pretty confident about, but then taking a decision early on about whether to make that second step.
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None Portrait Speaker 2
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Indeed, indeed.
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None Portrait Speaker 2
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Um I mean I do and um again the risk of a slightly long answer. So, so shut me up. Um if this is going too far, look the way and I should declare, you know, I was on the UK Stats Authority board for a number of years as well. Um I think what happened roughly speaking, is this at a very high level, the ONS was very successful in its data collection exercises over Covid. Right. So I don't want to say it was a success over Covid because Covid was not a success in any sense, but from a data collection point of view, um, data essentially on public health was not fit for purpose.

Unfortunately, before the outbreak, we then needed urgently the outbreak and the ONS really stepped up. My diagnosis at a high level is it then became essentially a victim of its own success because after Covid, it was asked to do more and more things, especially in the health side. Um, and I think what the organisation did is it just ended up doing too much and was just a bit too thinly spread. So what I think. So I think the ONS is now heading in a much better direction.

It has had to slim down the activities which which it has done. Um, but I think that's the right step. And that's the Devereux review as you know, um it's appointed some new people, most notably James Benford who used to be at the Bank of England and is now, I don't know whether he's appeared in front of you. Um he's made another statement this morning, I notice about the ONS again concentrating, you know, their various efforts. So I think it's definitely headed in the right direction.

That's one set of things. Can I say one more set of things as well?Um, I've had the honor of. Chairing their inflation advisory board. I do think the collection of the inflation numbers is an area where the ONS are actually doing a really good job. And that's something which other areas of the ONS could learn from. So you'll know, um I'm sure that the ONS have brought in as of March, all the scanner data from, you know, when you and I scan our stuff at the supermarket, we, they brought in all the scanner data.

That's tens of millions of observations. That's all held in the cloud that's processed on Python using the latest techniques. It's all open source, new people who come to the organisation can see what's going on and so forth. So I think if the ONS can continue in the direction it's done about concentrate its efforts and continue to learn from the best practice within the organisation, I think it can get to a much better place.
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None Portrait Speaker 2
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Uh, I think it was with the mini budget, it was tested somewhat to destruction, if you sort of see what I mean. And whilst that was a, you know, from an economic point of view, a very I won't go into the politics from an economic point of view, you know, a very difficult kind of occasion. I think it left the OBR from certainly from a constitutional point of view, as I understand it, of having their position reinforced with the various the fiscal lock and so forth, which has been made in legislation from last year.

Um, so I wish it hadn't occurred, but I think it's helped with the Obr's independence. So that's kind of one set of views from a purely constitutional point of view. I think the other point of view, and I mentioned this a little bit in my questionnaire, is, um, the last reviewer of OBR, Laura Van Guest, who I think gave evidence in front of this committee a while ago. She made this, I think, rather interesting point in her review, that one way to undermine a seemingly independent institution would be to starve it full of resources.

And she recommended, therefore, that the ONS. The ONS, the OBR has resources should be on a rolling budget point of view and so forth. And there's been that change as well as I understand it. Now. Again, going back to the earlier question, I'm not close enough to the organisation to understand exactly how the three year window works and when the negotiations start and so forth. Um, but I think that's a helpful part of the obr's independence.
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None Portrait Speaker 5
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There was.
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None Portrait Speaker 2
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So thank you for asking the question. Thank you for taking an interest in what I've been saying. Um, so the type of work that I've done has been to look at intangible investment across different countries, intangible investment, as you'll have heard this a lot from various witnesses is kind of knowledge investment, R&D software, those kinds of things, which would then lead to jobs. So kind of think of it as sort of technology investment and so forth, the kind of things that modern economies do.

So it's sort of a signal of cutting edge investment that economies are making. So if you compare across different countries, you are then into the difficult business of gathering evidence on the basis of what's going on in different countries. And for that, most studies rely on these various OECD indices, of which the OECD do many. So you'll know that they have an index of um broadly speaking, Labour market regulation, index of product market regulation, all sorts of other indices as well. Um, so the index of labour market regulation is um more regulation is correlated.

Let me make sure I get this the right way around. More regulation is correlated with less intangible investment. That's the sort of raw correlation in the data. Of course all this is very noisy and so on and so forth. What's difficult about all of this is the index of employment regulation is itself an amalgam of a load of subindices. So a subindex on hire and fire, a subindex on collective dismissals, a subindex on individual dismissals and notice periods and all that kind of thing.

So forgive me this long answer, but I'm to get to your question. If you want to know what's going on with employment rights Bill, you need to know act. I'm so sorry because it has been passed, hasn't it?I beg your pardon. If you want to know about what's what the economic consequences would be, you need to know what's going to happen to all the individual bits. So you can then work out what's going to happen to the subindices in the OECD index.

So you can then work out what's going to happen to the overall index, and then you can work out what's going to happen to it. Intangible investment. My understanding is most of those individual bits, most many of those are out for consultation. So we don't quite know yet what the actual outcome is going to be. What I was trying to talk about was the sort of broad finding, um, which is broadly speaking, there does seem to be an adverse correlation between that and those types of measures and intangible investment.
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None Portrait Speaker 1
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What you're.
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None Portrait Speaker 2
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Getting one.
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None Portrait Speaker 1
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I beg your pardon?
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None Portrait Speaker 1
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And you.
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None Portrait Speaker 5
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Thank you. Chair.
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None Portrait Speaker 6
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You can do that.
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None Portrait Speaker 2
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Just explain. Let me try and meet you. Um, half way. I mean, again, I think it's back to the earlier discussion that the additional scrutiny and the additional salience of the OBR, you know, is because the the fiscal position is is so difficult. And were we not were we in an easier position, we'd be much less salient. So I think I think that's a sort of background to that. Um, I think a couple of things.

I think if, if the OBR is, is not communicating the way it scores these supply side policies, not communicating how it thinks about the tax issues that we were just discussing, the regulation issues we were just discussing then it's quite legitimate of people to say, hold on a moment. The OBR is just throwing a bit of sand in the wheels of this whole process here, because if I, as a government minister or I as a civil servant, want to try to push through some kind of measure, it's all a bit of a black box as to how they score it.

If that were the case, then I would agree with you that, you know, it's throwing sand into those wheels, if I can use that. But I think what I quite like, um, about a lot of the work the OBR has done is it's attempted, I think, to clarify much more about how it comes to these types of decisions. So for example, I talked about it in the questionnaire, which you will have seen the consultation that it did on the effect of public investment in roads and rail and all that kind of thing, I think greatly opened up to outsiders how it would go around scoring these kinds of decisions.

So the reason I said yes and no is, um, I think it's got ahead of the pack by having at that very successful consultation and possibly it could do more on that side. Um, but I think that's a model for stopping this notion that somehow the OBR is kind of holding up the whole process.
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None Portrait Speaker 7
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You know, I think I.
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None Portrait Speaker 2
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Think that's a fair set of criticisms. So let me react to that. The first thing is the government can just, the government can do what it wants to do, for example. So I think there have been occasions where the current Chancellor has said, you know, what, the OBR has forecasted X for productivity. We're going to beat it. So that's perfectly okay. If the government decide, you know, they've got a policy and they want to get on with it, that's perfectly all right.

So I think that's thought number one. So, um, as I say, I, uh, if we're going to move away from the situation of the government marking its own homework and having some sort of arbitration, we've got to move to some sort of bar if you sort of see what I mean being set on that. But as I say, it's the government's decision. That's the first thing. The second thing is, um, I do think there is something very difficult about the long run and the short run issues as well.

And my guess, my immediate reaction is if the government's got any government of any political complexion has got a good long run scheme, they should definitely go ahead with it. Where that takes you is whether the OBR or indeed any other forecasting organisation should be getting into doing longer run forecasts, which again, I think is something which has come in front of this committee. I looked at the Congressional Budget Office yesterday and I know you had Doug Elmendorf in front of your committee, who I've also been in contact with, I should say, and has offered his help and so forth very kindly.

Um, and I know Doug was pushing very hard for a ten year forecast. With all due respect to the CBO, if you look at the CBO's ten year GDP forecast, it's sort of a wiggly line for the first five years. And then five years after that, it's a straight line. So I'm not sure there's much I could be being completely unfair to them. So that was my reading of it. So let's be clear for the.
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None Portrait Speaker 2
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Um.
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None Portrait Speaker 6
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Maybe next time.
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None Portrait Speaker 6
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Over my shoulder.
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None Portrait Speaker 2
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It's something you've discussed a lot on this committee. So, um, a few thoughts. One thought is, um that. There's going to be one fiscal event per year. There may be more room to discuss these longer term issues in the march. Economic and fiscal outlook, rather than just confining it to one thing. So I think that's one thing. Second thing is, um, this may be a small one, but I was struck by this.

The chief economist of LinkedIn came to Imperial recently to talk to our students, gave a fantastic talk and pointed out the increasingly people are posting, as it were, essays, as it were on, on, on LinkedIn. And LinkedIn has got an enormous reach. Now, as she was saying, it's not designed actually for, you know, like Twitter and or Substack to post things. But that may be something I think the OBR is making some inroads into all of that. Um, so, so I think that might be another way of doing it.

I thought the final thing that I particularly liked, um, in the FSR are the international comparisons as well as those cohort comparisons as well. I think it's very, very striking to read that, you know, the British level of revenue to GDP is this relative to the historical sense. So I think that came over very well, but also relative to what's going on in other OECD countries that came up very well as well. Now, of course, comparing things across countries, we're now back into the ONS and index number problems and all that kind of thing.

So we need to get on top of all of that. But I think that's a good medium.
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None Portrait Speaker 8
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Your ladyship.
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None Portrait Speaker 1
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Um.
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None Portrait Speaker 9
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Right?
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None Portrait Speaker 9
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In the wrong place.
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None Portrait Speaker 2
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Yes.
This debate has concluded
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